THE PHOENIX:
Napster the Good Passes Away; Napster the Bad Will Rise From Its Ashes

by Rob Brookman

Watching the parade of attorneys and executives trotted out to defend Napster during its recent legal travails, it's hard not to feel a bit of admiration for the sheer volume of temerity on display. Let's face it: Anyone who can stand before a throng of cameras and microphones and flatly declare that Napster and its global network of 30 million file pirates are upholding the "friends and family" spirit of the 1992 Audio Home Recording Act possesses chutzpah in quantities that most of us only dream of.

In retrospect, even Napster lawyer David Boies' admission last year to Time magazine that the company had a 50-50 chance in court -- seen as a stunning statement of concession by most legal analysts -- today seems rather brash. After all, the likelihood of a Napster victory is and always was zero.

That's not to say the recording industry presents a sympathetic or particularly believable victim. Many observers say the downturn in record sales that the RIAA has laid at Napster's doorstep is probably attributable to other factors entirely, in particular the generally shoddy product peddled by the major labels. Plus, there's strong anecdotal evidence that most music-swappers use Napster to preview tunes or make mixed tapes, not to create track-by-track replicas of entire albums. If that's true, it suggests that Napster plays a role in the music business similar to pop radio -- far from hurting record sales, it might actually boost them over time.

But the crux of that argument -- that Napster makes music available for "substantial non-infringing uses" -- hasn't proved effective in court. And it shouldn't. Because the fact remains that Napster, however humble or quixotic its beginnings, is today a big, successful company whose primary business -- or at least its primary side-effect -- involves the large-scale circumvention of music copyright laws.

Copyright infringement was the implicit intent of the company and its software even back when the service was used by a few thousand, instead of many million, people. Far from representing the small, close-knit group of "friends and family" allowed under the Audio Home Recording Act, the early Napster community was from the start a far-flung network of strangers bootlegging copyrighted music files for anyone with a quick modem and the right software. Now that Napster is a household name the world over and an unregulated conduit for almost every scrap of recorded music known to man, even the service's most ardent supporters are hard-pressed to argue its activities don't amount to anything less than a wholesale disregard for the idea of intellectual property.

Apparently, though, few people beyond musicians and record industry executives have a problem with that. In fact, many in the peer-to-peer music swapping movement see themselves -- and, by extension, Napster -- as a confederation of modern-day Robin Hoods, sticking it to the robber barons who they view as the ultimate beneficiaries of industry royalties. It's an attitude that's galling to many artists and record companies, especially because, in Napster's case, the unrestricted sharing of music files on a global basis isn't just subverting their intellectual property rights, it's making lots and lots of money for the folks who propagated the scheme in the first place.

Chief among of whom, incidentally, is the decidedly un-Robin Hood-esque concern, Bertelsmann.

Bertelsmann, which is among the world's largest media monoliths and once was a party to the RIAA's suit against Napster, surprised many in the industry when it announced it was buying into the company late last year. Bertelsmann executives, predictably, used the occasion to paint the vast, multinational conglomerate as a visionary, one that would revolutionize the music industry's relationship with the Internet.

"The industry has not embraced the usage of file sharing. We, together with Napster, are going to change all that," crowed Andreas Schmidt, president and CEO of Bertelsmann's eCommerce Group. "Somebody had to step up to the plate and take the leadership position."

On the heels of Napster's recent courtroom defeats, fans of file swapping might now ask themselves what sort of leadership position Mr. Schmidt and Bertelsmann planned to take. In retrospect, why would a huge media conglomerate spend good money on comparatively small business that a) makes it possible to obtain music for free in an unrestricted and regulated environment and b) is likely to lose a long and costly legal battle? Surely Bertelsmann, which once was among those amassed at Napster's gates, knew Napster in its current form was doomed?

The answer is, of course it did. And chances are, it was part of the plan. Bertelsmann is well-known for its "unite and conquer" strategy of buying and marrying companies that produce media content and those that provide channels of distribution. For example, the corporation is not only the world's largest publisher (it bought Random House and Bantam Doubleday Dell in 1998), it owns a hefty stake in Barnesandnoble.com, the Web's second largest bookseller behind Amazon.com.

How does Napster fit that strategy? Consider that Bertelsmann already owns BMG, the fifth largest record label. Napster, which is both a well-recognized brand and the file-sharing system of choice of most Internet denizens, would seem the ideal place to establish a music distribution beachhead in cyberspace.

There's just one problem: Napster made its name giving music away for free, which is anathema to corporate executives and shareholders alike.

That, of course, is where the courts come in. Bertelsmann could never act unilaterally to tinker with the Napster formula. It would prove a public relations disaster. But once the judges announce that Napster's die is cast, the corporation can bemoan the unfairness of the legal system in public while simultaneously transforming Napster into what Bertelsmann must have envisioned all along: a pay-per-download service.

Whether such a move would prove successful is another question. Certainly, Bertelsmann is betting that many Napster users will acquiesce to a fee-based download arrangement because they're familiar with the system, which, by most accounts, is still the best and easiest in cyberspace. Likewise, the company knows that a Napster defeat in court makes it unlikely that another free file sharing system (the much-discussed Gnutella, for example) will grow as big or as centralized as Napster, which is another key to the service's widespread appeal.

But if it works -- if even a fraction of current Napster users pay for downloads and P2P file sharing winds up shunted to the fringes of the Internet -- it will prove an odd end to the Napster tale. It will mean that a final ruling against Napster will ultimately represent a sweeping victory for Bertelsmann -- both as former plaintiff and current defendant. And the only real losers will be the ordinary music fans who made Napster a success in the first place.


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